Mortgages Simplified – Different Types of Mortgages
1. Conventional mortgage
- How It Works: Requires a small down payment (as low as 3% less than 20% requires private mortgage insurance (PMI)).
- A good credit score (usually 620+)
- Stable income & debt-to-income ratio (usually below 43%)
2. FHA Loan (Federal Housing Administration)
- How It Works: Requires a small down payment (as low as 3.5%)
- A credit score (usually 500+)
- Requires mortgage insurance, adding to costs.
3. VA Loan (Department of Veterans Affairs)
- How It Works: No down payment or closing costs.
- No PMI.
- Offers lower interest rates and easier qualifications.
- Best For: Veterans, active-duty military and eligible spouses.
4. USDA Loan (U.S. Department of Agriculture)
- How It Works: No down payment required, but income limits apply.
- Requires a small mortgage insurance fee.
- For rural and suburban homebuyers (must meet location requirements).
5. Jumbo Loan
- How It Works: For expensive homes that exceed conventional loan limits ($766,550+ in most areas for 2024).
- Requires a higher credit score (typically 700+).
- Larger down payments (10–20% or more) are required.
- Best for buyers purchasing high-value homes.
6. Fixed-Rate Mortgage
- How It Works: The interest rate stays the same for the entire loan (usually 15, 20, or 30 years).
- Predictable monthly payments (good for budgeting).
- Best For: Buyers who want stability and plan to stay long-term.
7. Adjustable-Rate Mortgage (ARM)
- How It Works: Starts with a lower interest rate (for 3, 5, 7, or 10 years), then adjusts periodically.
- The rate can increase or decrease based on market conditions.
- Best for short-term homeowners or those expecting income growth.
Which Mortgage is Right for You?
Recent Blog Posts
Stay up to date on the latest real estate trends.
